Question:
I'm wondering if you could provide insights in, or criticism of, Simon abundance index. A friend recently told me about it and I was very surprised not to find anything on it other than stuff written by the people who built it.On top of this strange confidentiality of the index, as well as the surprise at "no resource scarcity, we're actually improving", I have a few other reservations.
What it says about resources being virtually unlimited leads me to compare it with that math paradox of the arrow that always covers half of the remaining distance, infinitely, instead of touching the target -the Earth being limited, at some point I think we'd run out even if we optimized our consumption to the molecular level. It also takes into account the richest 10% when trying to show that the average work time needed to buy some basic items across the world has lessened, so we're going better with a bigger population, which doesn't look fair. I also know that among animals, large populations collapse after a while due to lack of resources -but they say it doesn't account for humans resourcefulness (could be a "not for us" bias, but could also be relevant).
Answer:
Your observation about the lack of material on the Simon Abundance Index is a valid one. Perhaps its newness accounts for a general lack of peer-reviewed material on the subject.
The Simon Abundance Index emanates from the ideas and work of economist Julian Simon who believed that human beings were the “ultimate resource” in the sense of being able to adapt to evolving situations (including during times when resources become scarce). Simon made a distinction between physical availability of resources and its economic availability. He argued that as resources become scarce (in a physical sense), their prices will rise which in turn will incentivize human beings to adapt by either finding new sources of supply, increasing the efficiency of resource use, recycling, or finding substitutes. This idea is appealing and examples of this can be found in everyday life. For instance, motor vehicles have become more efficient in their use of fuel (petrol and diesel), new sources such as shale oil fields have augmented the supply of crude petroleum. Furthermore, the substitution away from petroleum as a source of motor vehicle fuel is nearly complete with advancements in electric vehicle technology.
The Simon Abundance Index is an attempt to capture this idea and measure the change in abundance (in an economic sense) of resources over time. Mathematically, the index is calculated as the ratio of change in population over change in time-price. Time-price is the time an average human has to work to earn enough money to be able to buy a commodity. This in turn is calculated as a change in real price over change in real hourly wage rate (computed as GDP per capita over average annual hours worked). You correctly pointed out the important methodological shortcoming of disregarding the distribution of income while computing hourly wage rate. This overestimates hourly wage and therefore concomitantly underestimates the time-price of commodities. In addition, using change in population in the numerator of the Simon Abundance Index reinforces the upward movement and indicates increasing abundance.
While the ideas of Simon about resource availability are nuanced, the translation of these ideas into an index to depict resource abundance is perhaps not without serious shortcomings. Therefore, while understanding ‘abundance’ in this framework, it is important to distinguish, just like Simon did, between the physical availability of a resource and its economic availability (think of this as making a resource last longer by increasingly using it efficiently). Therefore, although the physical availability of a resource, say petroleum, is finite for the world as a whole, humanity can increase the availability of petroleum by using it proficiently.
